People walking by the soon to be Next Door Restaurant on March 7th, 2013 in Berkeley, Calif. Embattled SF Housing Authority Director Henry Alvarez has been working with his wife to open a restaurant on May 1st. Next Door Restaurant at 290 Adeline St is the former Addie's Pizza Pie.

Photo: Jessica Olthof, The Chronicle

People walking by the soon to be Next Door Restaurant on March 7th,...

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People walking by the soon to be Next Door Restaurant on March 7th, 2013 in Berkeley, Calif. Embattled SF Housing Authority Director Henry Alvarez has been working with his wife to open a restaurant on May 1st. Next Door Restaurant at 290 Adeline St is the former Addie's Pizza Pie.

Photo: Jessica Olthof, The Chronicle

People walking by the soon to be Next Door Restaurant on March 7th,...

Image 6 of 8

San Francisco Housing Authority Executive Director Henry Alvarez is seen during a Housing Authority Commission meeting on Thursday, January 24, 2013 in San Francisco, Calif.

"I would hope that he would not actually be doing anything other than taking care of whatever his health issues were that prompted him to seek medical leave," said Supervisor London Breed, who grew up in San Francisco public housing. "I'm not going to jump to a conclusion. ... I do think we need to launch an investigation to determine if there is fraud in this particular case."

"If true, the commission will be asking Mr. Alvarez for a full explanation," Dennis said.

Alvarez is listed as the owner on a business license for the Next Door Restaurant at 3290 Adeline St., according to Berkeley's Department of Finance. The restaurant's Facebook page indicates it is to open May 1.

It's unclear how involved Alvarez is in the restaurant and whether he has spent part of his two-month medical leave setting up his new venture. Alvarez did not return calls for comment.

Employee complaints

Alvarez sought a medical leave in late January "to address immediate personal matters" as he faced rising criticism of his leadership, including complaints to Mayor Ed Lee's administration from dozens of employees about his alleged bullying. Alvarez is also facing three lawsuits from authority staff accusing him of discrimination and retaliation.

Two of those lawsuits involved allegations that Alvarez fired or tried to fire employees after they took leaves of absence - one for paternity leave and another after a knee surgery.

The criminal investigations unit of the U.S. Department of Housing and Urban Development's Office of Inspector General on Jan. 31 requested to review all contracts the authority awarded during Alvarez's tenure, and a recent HUD performance review scored the agency among the bottom two in the state.

Alvarez was granted an eight-week medical leave for an unspecified condition Feb. 1 in a closed-door session of the Housing Authority commission. His leave ends March 29, and he is being paid from accrued sick time, Dennis said.

His future at that point is uncertain, but Alvarez, who makes $210,500 annually and gets free health care benefits, has asked that his contract not be renewed when it expires June 12.

The mayor replaced all but one housing commissioner a week after Alvarez's leave was approved, and he has pledged to overhaul the public housing agency.

"Mr. Alvarez is not a part of that future of public housing in San Francisco," Lee's spokeswoman, Christine Falvey, said Thursday.

Searching for answers

While the Housing Authority and its director are funded by the federal government, its oversight body, the Board of Commissioners, is appointed by the mayor. The mayor, through his commission appointees, effectively controls the fate of the executive director as well.

Lee's office said Thursday it expects the commission to "get a full explanation" on Alvarez's business activity while on leave, Falvey said.

The authority's personnel policies state that sick leave is granted to an employee "unable to work because of: personal illness or injury, childbirth or appointments for medical, dental or similar examination or treatment." Sick leave can also be granted to care for a spouse, domestic partner or child with any of those conditions.

The employee must "provide medical verification for any illness" for an extended sick leave.

It's unclear whether Alvarez met those conditions. Dennis said Alvarez provided the commission with a doctor's note during the Feb. 1 closed session, but she declined to turn the document over to The Chronicle pending a legal review of its contents.

"Obviously, this raises the question of whether there ever was a medical reason for him to be on leave in the first place," said Sara Shortt, director of the Housing Rights Committee of San Francisco, which advocates for low-income tenants. "This is money meant to provide low-income housing to San Francisco residents. If it turns out it's subsidizing Henry to pursue an entrepreneurial undertaking instead, then that's a real shame."

Pursuing 'a dream'

Alvarez told Diablo, an East Bay magazine, that he and his wife, Dionne Roberts, have been toying with the idea of opening a restaurant for more than three years, but then became more focused in the last 18 months as he neared the end of his contract.

"We're moving forward on this dream and we'll see how it goes - it just might be easier than (working at the Housing Authority)," he told the magazine.

Alvarez also said "(I) did my research" in finding the restaurant's location.

His contract forbids him from acquiring any direct or indirect interest in any business that conflicts with the Housing Authority's interest, which is not specifically defined. A separate clause in the contract allows him to engage in activities like lecturing, consulting or any other activity as long as it does not interfere with his ability to perform his obligations to the authority. Any such activity that would require Alvarez to be absent for two consecutive weeks must be disclosed in writing 10 days in advance. That was not done here, Dennis said.

The Housing Authority's personnel policies forbid any employee from engaging in outside employment that conflicts with their official duties and responsibilities.

Breed said she wants answers on the depth of Alvarez's involvement in the restaurant.

"It's one thing to provide the money for it," she said. "It's another thing to be on medical leave and be working in a way that shows he could have been doing his job for the residents of public housing in our city."